Tuesday, 21 Aug 2018
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ECONOMY

Vietnam's bold institutional reforms brighten economic prospect: Advisory board

Updated at Monday, 06 Aug 2018, 16:03
The Hanoitimes - Vietnam`s GDP growth rate is expected to reach 7.47% per year in the 2018 - 2020 period thanks to potential breakthroughs in institutional reforms and improvements in growth quality.
Breakthroughs in institutional reforms and improvements in growth quality will likely help Vietnam's economy to grow as strong as 7.47% in the next three years, the Vietnamese Prime Minister's Economic Advisory Board has said.

The board laid out three main scenarios for Vietnam's economic prospects in the 2018 - 2020 period, using econometric model and data collected in 1990 - 2017, VietnamFinance reported. 
 
Illustrative photo.
Illustrative photo.
The first scenario is based on "normal conditions" of the economy, while the second retains most of assumptions of the first, albeit more positive in some aspects (higher global economic growth, the private sector is more optimistic about Vietnam's reform efforts, among others), and a higher level of expansionary monetary and fiscal policies.

The third scenario is similar to the first one, coupled with breakthroughs in reforms and economic policies (including investment-business environment, competition policy, innovation), leading to a stronger capital investment from the private sector, improvements in state-owned enterprises' efficiency, as well as positive FDI spillover effects to domestic enterprises.

In the first scenario, GDP's growth rate averages 6.71% per year in the 2018 - 2020 period and 6.63% in 2016 - 2020. The contribution of total factor productivity (TFP) to GDP is expected to increase from 32.07% in 2018 to 35.49% in 2020. 

Inflation rate in this scenario is projected at under 4% per year, while export growth stands at 12.15% in 2018 and 9.63% in 2019, before returning to double-digit growth rate in 2020. 

Trade balance is expected to sway between trade deficit and surplus, averaging -0.19% of GDP in 2018 - 2020 and 0.24% in 2016 - 2020. 

State budget deficit and public debt will be on a declining trend and are projected to reach 3.49% and 60.22% of GDP by 2020. 

In the second scenario, GDP's growth rate is set to reach an average of 6.83% per year in the 2018 - 2020 period and 6.70% in 2016 - 2020. Nevertheless, TFP contribution to GDP will be lower at 31.55% in 2018 and 35.71% in 2020. 

In the context of strong global economic recovery and an increase in aggregate demand, export growth is expected to reach double digit in the 2018 - 2020 period, averaging 12.4% per year and 14.41% in 2016 - 2020.

Moreover, inflation rate may be higher than in the first scenario, exceeding 4% in 2019 - 2020. Trade deficit and state budget deficit will be higher than those of in the first scenario in the 2019 - 2020 period, while public debt is projected to be at 60.52% of GDP in 2020. 

In this scenario, the economic growth will be higher than the first, but accompanied with higher inflation. 

The third scenario draw up breakthroughs in institutional reforms and improvements in growth quality. 

Consequently, GDP growth rate is expected to reach 7.47% per year in the 2018 - 2020 period and 7.08% in 2016 - 2020, thanks to high contribution of TFP to GDP from 35.11% in 2018 and 44.27% in 2020. 

Under this circumstance, export growth is expected to reach an average of 15.51% in the 2018 - 2020 period and 15.28% in 2016 - 2020. Inflation rate may be lower than the first scenario, while trade surplus is higher. 

Additionally, state budget deficit and public debt stand at 3.5% and 58.28% of GDP by 2020, respectively. 

In this scenario, Vietnam will enjoy a high economic growth rate and significant improvements in productivity. 
Hai Yen
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